Best Project Finance Lawyers in Iran

About Project Finance Law in Iran

Project finance refers to the method of funding large-scale infrastructure or industrial projects based primarily on the projected cash flows of the project, rather than the balance sheets of its sponsors. In Iran, project finance has gained prominence in sectors such as energy, oil and gas, petrochemicals, transportation, and public infrastructure. This financing model is especially important for foreign investors and developers who wish to participate in Iran’s vast infrastructure development market.

The landscape of project finance in Iran is shaped by both domestic regulatory frameworks and international legal considerations. With the government’s ongoing emphasis on public-private partnerships (PPPs) and foreign investment, understanding the legal environment is essential for successful project implementation and risk management.

Why You May Need a Lawyer

Project finance transactions in Iran can be complex due to the variety of stakeholders involved, the lengthy duration of projects, and the need for compliance with local and international regulations. Seeking the assistance of a lawyer is essential in the following situations:

• Negotiating and drafting project agreements such as EPC (Engineering, Procurement, and Construction) contracts, off-take agreements, and loan documents
• Structuring partnerships or joint ventures with Iranian or foreign entities
• Securing government permits and approvals required for project commencement and operation
• Ensuring compliance with local laws, regulations, and international sanctions where applicable
• Conducting due diligence on assets, participants, and legal frameworks
• Managing dispute resolution and claims during the lifecycle of the project
• Navigating tax, customs, labor, and environmental regulations
• Protecting intellectual property and investment rights

Local Laws Overview

Several key aspects of Iranian law are particularly relevant to project finance:

• Foreign Investment: The Foreign Investment Promotion and Protection Act (FIPPA) governs foreign investment in Iran, offering guarantees and legal protections for foreign investors, including repatriation of profits and equal treatment.
• Public-Private Partnerships (PPPs): Iran encourages collaboration between public and private sectors. The legal framework for PPPs details procedures, approval mechanisms, and risk-sharing arrangements.
• Banking and Finance: All financial transactions in Iran must comply with Islamic banking principles, affecting loan structures, guarantees, and interest mechanisms.
• Contracts and Dispute Resolution: Iranian contract law draws on both civil law and Sharia principles. Dispute resolution can occur through local courts or, if specified, domestic or international arbitration.
• Taxation: Project finance deals must consider taxation on profits, VAT, and possible tax incentives or holidays offered for certain investments.
• Environmental and Labor Laws: Compliance with Iranian environmental protections and labor regulations is mandatory for all projects.
• Sanctions: International sanctions can affect the participation of foreign entities, access to finance, and the import or export of project materials and equipment.

Frequently Asked Questions

What is project finance and how does it differ from traditional financing in Iran?

Project finance in Iran involves the funding of projects based on future cash flows, rather than relying on the sponsors’ assets. This is different from traditional lending, where the lender focuses mainly on the borrower’s overall creditworthiness.

Can foreign investors participate in project finance deals in Iran?

Yes, under the Foreign Investment Promotion and Protection Act (FIPPA), foreign investors can participate in project finance structures and receive legal protections, including repatriation of capital and profits.

What are the main sectors in Iran that use project finance?

Key sectors include oil and gas, power generation, renewable energy, transportation (roads, rail, ports, airports), water and wastewater management, and petrochemicals.

Are Islamic banking principles mandatory in Iranian project finance?

Yes, all banking and financial activities must comply with Islamic (Sharia) law, which prohibits interest and speculative transactions, and encourages profit and loss sharing arrangements.

What types of contracts are most common in project finance?

Common contracts include EPC (Engineering, Procurement, and Construction) agreements, concession agreements, off-take agreements, finance agreements, and shareholder agreements.

How are disputes typically resolved in project finance deals in Iran?

Dispute resolution can occur through Iranian courts, but parties may agree to resolve disputes through arbitration, either in Iran or in a neutral international forum if specified in the contract.

What government approvals are generally required?

Required approvals vary by sector and project but often include environmental clearances, construction permits, foreign investment licenses (for foreign investors), and sector-specific regulatory approvals.

Are there any tax incentives for project finance investments?

Iran offers various tax incentives for certain infrastructure projects and investments, such as tax holidays, exemptions, or reductions, especially in free trade zones and under FIPPA.

How do international sanctions affect project finance in Iran?

International sanctions may limit the availability of foreign financing, restrict the import or export of project-related equipment, and affect contracts with foreign partners. Legal advice is essential to navigate sanction risks.

Can project companies obtain guarantees for their financing?

Yes, project companies can seek guarantees from host government entities, local banks, or international agencies, but the availability depends on negotiations and compliance with local laws and regulatory requirements.

Additional Resources

To further assist you, consider consulting these resources and organizations:

• Organization for Investment Economic and Technical Assistance of Iran (OIETAI): Handles foreign investment licensing and regulatory matters
• Iranian Ministry of Economy and Finance: Provides guidance on tax and financial regulations
• Ministry of Energy, Ministry of Roads and Urban Development, and other sectoral ministries: For sector-specific legal requirements and project opportunities
• Central Bank of Iran: Oversees financial regulations and banking compliance
• Chambers of Commerce: Provides networking and legal information for businesses and investors
• Recognized Iranian law firms with expertise in project finance and international transactions

Next Steps

If you are considering involvement in a project finance transaction in Iran or need legal assistance:

• Clearly define your project goals, participants, and proposed structure
• Gather preliminary information about project location, sector, required permits, and any existing agreements
• Consult with a qualified Iranian lawyer or law firm experienced in project finance and international transactions
• Prepare to conduct due diligence on regulatory environments, counterparties, and applicable sector-specific laws
• Stay informed about changes to local laws, investment regulations, and sanctions that might affect your project
• Discuss with your legal advisor the best structures and instruments to protect your rights and align with Iranian law

Seeking advice early in the process can help you navigate the complexities of project finance in Iran and ensure the long-term success of your investment or development project.